Year-end compliance issues can sometimes be confusing. We’ve assembled answers to a number of frequently asked questions that may prove helpful to you.
Log in to the Plan Service Center, click on the Compliance menu, then select Order census file in the drop-down menu and follow the instructions. To download an existing census file, select Download census file in the drop-down menu and select the desired file.
Census data can be uploaded by following the steps referenced below:
You should include the original hire date, most recent rehire date and most recent termination date. You only have to provide the rehire date for an employee if it falls after the most recent termination date.
NOTE: If you have participants with multiple rehire and termination dates, a separate spreadsheet must be provided to the Compliance Analyst containing all dates to ensure testing is completed accurately. This additional spreadsheet must be provided within 48 hours of your census file being successfully uploaded.
This report is provided to give you the opportunity to correct the data file before the end of the year. To make changes, follow either one of these two steps:
You should always provide the original hire date for an employee, the most recent termination date and most recent rehire date, if applicable. Access the census file and verify that the participant information correctly reflects these dates. Save the revised census file and re-upload to the Plan Service Center. If you have an employee whose history includes more than one of any of these dates, you will need to send the complete employment history to your Compliance Analyst within 48 hours of your census file being successfully uploaded. For instructions on how to run a new census file and upload new data, click here.
Please contact the Compliance Team for assistance.
You can order a census file from the Plan Service Center at any time. The census file compiles your PDI uploads into one year-end census file that can be transmitted to us via the Compliance tab on the website.
Because we have several data checks in place via the website upload function, you must submit the year-end file electronically via the Plan Service Center. For instructions on how to run a new census file and upload new data, click here.
“Pre-entry” compensation is compensation earned by a newly eligible employee from the date the employee was hired or from the beginning of the plan year (whichever is later) through the date the employee is first eligible to join the plan. For example, if your plan runs on a calendar-year schedule, pre-entry compensation for an employee eligible to enter the plan on July 1 would be the amount earned from January 1 through June 30. This compensation should include all of the components required by your plan’s definition of compensation.
“Total” compensation represents all of a participant's compensation, while “plan” compensation is the compensation used to calculate employee deferrals and employer contributions, and may exclude some forms of compensation like bonuses or overtime.
If your plan does not exclude certain amounts from consideration for a contribution, then “total” compensation and “plan” compensation may be the same. If your plan includes elective deferrals, be sure to add them back to “total” compensation (if not already included in that amount) to arrive at “plan compensation.” If your plan excludes fringe benefits, or other forms of compensation such as bonuses or overtime, subtract those amounts from “total” compensation. Check your plan terms to determine what amounts, if any, are to be included or excluded.
Because all employees must be considered for testing purposes, it is important that all employees who worked for the company during the plan year be included on the census file for testing purposes.
Yes. All employees who worked for the company during the plan year must be included on the census file.
Yes, include all employees who worked for your company during the plan year.
Yes. You are not required to include employees on your census who did not have any hours, compensation, or contributions allocated for the plan year. If the census file contains participants that terminated in a prior year, verify that termination dates have been entered into employees’ records. For instructions on how to run a new census file and upload new data, click here.
These are contributions made by a participant from compensation that is taxable and are sometimes referred to as “personal employee contributions.” Because these contributions are included in the ACP test, many plans have discontinued allowing employees to make personal contributions to the plan. Earnings on these amounts are taxable to the participant when withdrawn from the plan. After-tax contributions are tracked as “basis” in the plan so that they will not be taxed twice when the participant takes a distribution. Check your plan terms to determine if your plan accepts after-tax contributions. Any after-tax contributions should be reported in column O on the census file.
IMPORTANT NOTE: These personal employee contributions should not be confused with Roth 401(k) or Roth 403(b) contributions, which are also made from taxable income. Roth after-tax contributions are included in testing in the same way as pre-tax deferrals and should be reported in column Q on the census file. Earnings on Roth after-tax contributions may have special tax treatment if certain requirements are met.
You should upload one census that includes all divisions in one file.
No, these are placeholders to indicate that information needs to be provided. Please delete all headings before you upload this file via the Plan Service Center. You should have only individual employee data on the census file. For instructions on how to run a new census file and upload new data, click here.
No, please delete all totals. You should have only individual employee data on the census. For instructions on how to run a new census file and upload new data, click here.
Matching contributions are made by the employer when an employee contributes to the plan, and are typically tied to the amount the employee contributes (for example, 25 cents for every dollar contributed up to a certain amount). Non-elective contributions (sometimes also referred to as “profit sharing contributions”) are made by the employer regardless of whether the employee contributes to the plan. Please refer to your plan document to see if your plan allows these types of contributions.
Please contact your Retirement Plan Coordinator for assistance at (877) 872-5159.
This is a Microsoft® Excel programming function. If you have already saved your file, you may answer “No.”
Typically, the line numbers that correspond with the “X”s are the last lines of your census file. To prevent these errors, you will need to re-open the Excel version of the file, clear out all lines after the last employee’s information and re-save the file to txt. The file will need to be re-uploaded and those errors should no longer appear. If you need additional assistance, please contact your Retirement Plan Coordinator for assistance at (877) 872-5159.
The census file is a compilation of your PDI files, so it should match. It’s possible that the file may not coincide with your payroll records during a conversion year. If we did not receive complete contribution information from your prior recordkeeper, we will not have this information included on the census file.
Please contact your Compliance Analyst for assistance. Additional fees may apply if we have already started testing on your plan.
The Schedule C questions only apply to a “large plan” filer of the Form 5500. For instructions on how to determine whether you are a “large plan” or “small plan” filer, see the Form 5500 User Guide, which can be accessed in the Plan Service Center by clicking on the Compliance tab, selecting Compliance User Guide in the drop-down menu, and clicking on Form 5500 User Guide. If your plan’s Form 5500 must include Schedule H financial information and your plan is required to have an independent plan audit completed, you are a “large plan” filer and must answer the Schedule C questions.
If you are a large plan filer, you will provide us fee disclosure information through the Year-End Questionnaire.
For additional details, refer to the Schedule C Guidance section of the Form 5500 User Guide available in the Plan Service Center. To view the guide, click on the Compliance tab at the side of the page, and then click Compliance User Guide in the shaded row directly below the tab to load a new page. Click on Form 5500 User Guide.
Prior to preparing your Form 5500, we will send those identified as large plan filers additional information regarding Schedule C of Form 5500, including compensation that we receive and/or that is paid indirectly from the investments.
In the meantime, if you receive any compensation disclosure from a service provider, please forward that disclosure to your Relationship Coordinator.
To print a questionnaire from the Plan Service Center:
You can print the prior year’s completed questionnaire from the Plan Service Center by following the directions above. Select the questionnaire for the prior year compliance period.
A fidelity bond is a type of insurance that protects a retirement plan against losses resulting from fraudulent or dishonest acts of individuals covered by the bond. ERISA requires that every fiduciary of a benefit plan, as well as all persons who handle funds or other property of a plan (plan officials), must be bonded. The bond is for the protection of the plan and does not benefit any plan official or relieve any plan official of any obligation to the plan. The amount of the bond must be a minimum of 10% of the plan assets; however, it cannot be less than $1,000 and does not need to be more than $500,000, unless the plan holds employer securities. The maximum bond amount is increased to $1,000,000 for plans that hold employer securities. Capital Bank and Trust Company is exempt from the bonding requirements because it is a federally regulated bank.
No. Capital Bank and Trust Company is the trustee for your plan, and all withholding remittance and 1099R reporting is done under a special CB&T tax ID. Your plan would need a separate trust tax ID only if it were self-trusteed.
Questions on the year-end questionnaire may change from year to year (e.g., questions regarding contribution totals, fees paid, and allocation requests). This information enables us to complete your year-end compliance services as accurately as possible.
This is a trust statement that covers the period of time when Capital Bank and Trust Company was not the trustee of the plan. If your plan’s assets were transferred from another trustee during the year, we will need a transferred asset report to cover the portion of the plan year when another trustee was used, along with a copy of the prior year’s Form 5500 for your plan.
The transferred asset report should cover the period from the first day of the plan year through the date the assets were transferred. The information should include the following applicable information by participant and in total:
Annual testing is required to demonstrate your plan’s compliance with various sections of the Internal Revenue Code. Compliance supports the tax-deferred status of your plan assets and allows you to take a deduction for any employer contributions you make to the plan.
If your plan exceeds the ADP limit, you have two options:
If the correction is made after the two-and-a-half month period, your company would be subject to a 10% excise tax. (This should not be confused with the 10% tax withheld from the corrective distribution to HCEs. This 10% withholding tax is similar to payroll withholding in the form of a prepayment of income taxes.)
NOTE: Any corrective distributions made due to failed testing are taxed in the calendar year the distribution is processed. Also, if your plan is an Eligible Automatic Contribution Plan (EACA), the testing deadline extends to six months following the end of the plan year if all eligible employees are “Covered Employees.” For additional information, please refer to the Pension Protection Act (PPA) Amendment that you executed.
For those plans that offer Roth contributions, a corrective distribution may come from pre-tax contributions or Roth after-tax contributions, or both (see your plan terms). Earnings on these distributions are included in the HCEs’ gross income, regardless of contribution type.
Please note that excess amounts that can be treated as catch-up contributions must be treated as such, before any refunds are processed. This recharacterization is done in lieu of a refund.
To remedy a failed ADP/ACP test via refunds, you must approve and submit the excess contribution report to us via the Compliance To Do List. This report will be provided to you with your plan’s testing results via the Compliance tab on the Plan Service Center:
Please review, approve and submit the report for processing. Please note that it may take 3 to 5 business days to process this request, so it is important to complete this step as quickly as possible before your plan’s testing deadline.
The check is sent to each participant’s address of record unless other written mailing instructions are noted on the excess contribution report.
Yes. The amount is taxable to the participant in the year it is distributed. The participant will need to include the taxable portion of the distribution as income on his or her personal tax return.
Missing the deadline would cause your company to be subject to a 10% federal excise tax based on the amount of the refund.
Your plan is considered top-heavy when the balance of the assets for key employees exceeds 60% of the total asset value of the plan. Key employees are individuals who meet one of the three following qualifications:
Once your plan becomes top-heavy, you must implement the top-heavy vesting schedule outlined in your adoption agreement and may have to make a top-heavy minimum contribution based on your plan document provisions. This minimum contribution is either 3% of each participant’s compensation or the highest deferral percentage of your key employees, whichever is lower. We will provide you with a separate report detailing if your plan is top-heavy as part of our testing services.
Testing work does not begin until all three required pieces of information are received. If any of the information is delayed, we cannot guarantee that the testing results will be completed within two-and-a-half months of the plan’s year-end. This would, in turn, delay any refund processing that may be necessary if the plan fails to meet the ADP, ACP or other plan limits.
Please call your Retirement Plan Coordinator at (877) 872-5159 for an individual response. There are many situations that would result in different answers.
All Form 5500s must be filed electronically. An authorized signer for Form 5500 must become credentialed via the DOL’s website. We provide guidance and instructions on this process in our Form 5500 User Guide, available in the Plan Service Center. To view the guide, click on the Compliance tab at the side of the page, and then click Compliance User Guide in the shaded row directly below the tab to load a new page. Click on Form 5500 User Guide.
In addition, for large plan filers, disclosure is required on the Schedule C of Form 5500 (Annual Return/Report of Employee Benefit Plan) regarding compensation in excess of $5,000 received either directly or indirectly by a service provider (including service providers to plan investment options, such as mutual funds). Please see www.dol.gov/ebsa/5500main.html for more information.
The IRS Form 8955-SSA replaces the Schedule SSA to the Form 5500 and reports all terminated participants that continue to have a vested account balance in the plan. Plan administrators must file this new form with the IRS and not through the Department of Labor’s EFAST2 filing system.
The filing deadline for this form is the last day of the seventh month following the last day of the plan year (plus extensions). For example, plans on a calendar year (i.e. ending 12/31) are required to file the Form 8955-SSA by July 31 (plus extensions).
Our year-end questionnaire asks if there were any late contributions to the plan because this information must be included on the annual Form 5500 for your plan.
This item pertains to the timeliness of deposit of any employee deferral contributions, personal voluntary contributions or loan repayments. The determination of whether a contribution is late is based on the Department of Labor guidelines. According to the guidelines, employee deferrals and loan payments must be remitted to the trust as soon as the money can be segregated from your general assets, but no later than 15 business days following the month in which this money was withheld.
Small plans (those with fewer than 100 employees at the beginning of the plan year) have a safe harbor deadline of the 7th business day after the amounts are withheld from the participant’s paycheck. A deposit is not considered to be late if made to the trust by the 7th business day. The general standard of “as soon as the money can be segregated from your general assets” applies if you do not meet the safe harbor deadline. The safe harbor deadline is not available (at the present time) for large plans.
Late contributions are reported on Form 5500 (Schedule H for large plans and Form 5500-SF for small plans). In addition, you should check with your tax advisor regarding whether a Form 5330 may have to be filed with the IRS.
The form needs to be signed by a plan fiduciary or officer of your organization. The Form 5500 is filed electronically with the Department of Labor (DOL). As a result of this electronic filing, the individual who will sign the Form 5500 must obtain credentials (an electronic signature) via the DOL website. Please refer to the Form 5500 User Guide in the Plan Service Center for assistance in obtaining these credentials. To view the guide, click on the Compliance tab at the side of the page, and then click Compliance User Guide in the shaded row directly below the tab to load a new page. Click on Form 5500 User Guide.
You’ll need to send the changes to your plan’s Compliance Analyst with clear instructions on what changes are being requested.
Yes. You need to send the changes to your plan’s Compliance Analyst with clear instructions on what changes are being requested. Additional processing fees may apply. The amended Form 5500 must then be electronically filed with the Department of Labor (DOL). Please refer to the Form 5500 User Guide in the Plan Service Center for assistance. To view the guide, click on the Compliance tab at the side of the page, and then click Compliance User Guide in the shaded row directly below the tab to load a new page. Click on Form 5500 User Guide.
All eligible participants and beneficiaries, including any terminated employees who have account balances in the plan, must receive the SAR. SARs should be provided no later than two months following the deadline (including extensions) for filing Form 5500.
We do not file the Form 5500 on your behalf. We prepare a draft Form 5500 in an acceptable format for filing electronically with the Department of Labor. This will be posted to the Plan Service Center on the Compliance tab with all applicable Schedules required for the filing (with the exception of an auditor’s report, if you are a large plan filer). It is the plan sponsor’s responsibility to review, approve all entries, electronically sign, and file the Form 5500.
The Department of Labor and the Internal Revenue Service regulate the filing schedule and penalties associated with Form 5500. Form 5500 and all required attachments (schedules and audit report, as applicable) are due to be filed no later than the end of the seventh month following the end of the plan year (for example, July 31 for a calendar plan year) if you did not apply for an extension. If circumstances require, you may file for an extension, but you must do so before the seven-month deadline. An extension is automatically granted if it is received on time. The extension provides additional two-and-a-half months for submission of the forms.
The DOL penalty for late filing without an extension can be up to $2,586 per day. In addition to DOL penalties, plan administrators may also face IRS penalties for not filing the plan’s Form 5500-series annual return. The IRS may impose a penalty of $250 each day the Form 5500-series return is not filed, up to a maximum of $150,000. If you have not filed Form 5500 on time, we suggest you contact an ERISA attorney to see if you are eligible to correct the oversight through the DOL’s delinquent filer program. If you are eligible, it would dramatically reduce any potential penalties.
Yes, we automatically file an extension on your behalf.
All Form 5500s are completed on a cash basis. We report the contributions that actually came into your account during the plan year and not the contributions attributable to the plan year. If you wish to have the Form 5500 reported on an accrual basis, please contact your plan’s Compliance Analyst for assistance.
If you received a partial Form 5500, it’s because we did not have all the necessary information to complete it. The specific information that we are missing is detailed in the letter you received along with the partially completed forms and schedules. You will need to provide us with the missing information no later than 60 days prior to your Form 5500 filing deadline in order to allow us enough time to complete and post it to the Plan Service Center for you to review, approve all entries and file electronically with the DOL.
We need the year-end questionnaire completed via the Plan Service Center. We will also need you to send an email to your plan’s Compliance Analyst with participant count information for items 6-7i of the Form 5500.
The copy we send you is for your records. We file the IRS Form 5558 with the IRS to request (on your behalf) an extension of time to file the Form 5500.
Yes, we report Form 5500s on a cash basis and will make the necessary adjustments to move your filing from an accrual to a cash basis.
Please contact your Retirement Plan Coordinator at (877) 872-5159.
For assistance with allocation processing (forfeiture allocations, profit sharing allocations or matching allocations), please contact your Retirement Plan Coordinator at (877) 872-5159.
The trustee for your plan is Capital Bank and Trust CompanySM.
Yes, as long as contributions have been received, the testing information is required so that we may complete the annual nondiscrimination testing and prepare the Form 5500 for your plan.
The entire year-end package is available to view and print on the Plan Service Center via the Compliance tab.
Yes. While qualified retirement plans such as 401(k)s are established with the intent to be permanent, the IRS recognizes that there may be legitimate business reasons for terminating such plans that would not jeopardize the tax benefits of plan sponsorship. If you are considering termination of your plan, please contact an ERISA attorney for guidance.
Your ownership information only needs to be input once on the Compliance tab in the Plan Service Center. After that, you may use the “Copy Ownership From Last Period” feature to carry over the prior year’s information.
Certain family attribution rules apply in the determination of HCEs and key employees. The information you provide will enable us to make these determinations correctly.